France Isn’t the Titan CEO’s Biggest Problem

A colorful letter from Maurice Taylor, CEO of tire maker Titan, has generated plenty of comment today. The most noted part of the letter is the lively swipes at the French government (“nothing but talk”), French unions (“crazy”) and the French workforce (“gets paid high wages but works only three hours”).

But beyond the critique of France, there is a more interesting subtext to the letter, which hints at a deeper frustration driving Mr Taylor. Governments in France and America, he says, are not doing enough to protect his businesses from low-cost Asian competition.

“The Chinese are shipping tires into France – really all over Europe – and yet you do nothing,” he tells French industry minister Arnaud Montebourg in the letter. China subsidizes its manufacturers, he says, while Western states aren't fighting back. “The US government is not much better than the French”

The tire industry wouldn't be the first to get decimated by low-cost competition from the emerging world, subsidy or no subsidy. But it's one of the lucky few to have managed to get import tariffs slapped on Chinese producers, with the Obama administration introducing a tariff regime on Chinese tires in 2009.

Those tariffs pushed up the price of a cheap Chinese tire in America — one seller told the WSJ his low-end $39 tires went up to $69 once the tariffs came into effect. But as others in the industry reminded the WSJ's John Bussey last January, the bulk of Chinese product making its way here was at the bottom end of the market — a space American manufacturers had long abandoned. The tariffs might have raised the price on the cheapest tires available to consumers, but they didn't do much for the companies – and they kicked off a low-grade trade war with China in the process.

Mr Taylor is proud of the tariffs though, noting in the letter that the company paid “millions to Washington lawyers to sue the Chinese tire companies because of their subsidizing. Titan won.” He does have a problem with the scheme that resulted, though: “The government collects the duties. We don’t get the duties, the government does.”

What should happen, this complaint suggests, is a tariff system that raises the price of a cheap foreign products, with the government redistributing the extra revenue earned by the price rise to local companies. That sounds like a pretty good business to be in as a local company, but not a particularly free market.

And free markets may not even be the ideal location for Titan's manufacturing operations, according to the letter. Mr Taylor may be no fan of China's anti-free-market ways, but it sure beats France, he says: instead of buying a factory in the dark heart of European statism, he'd rather “buy a Chinese tire company or an Indian one, pay less than one Euro per hour and ship all the tires France needs. You can keep the so-called workers.”

This copy is for your personal, non-commercial use only. Distribution and use of this material are governed by our Subscriber Agreement and by copyright law. For non-personal use or to order multiple copies, please contact Dow Jones Reprints at 1-800-843-0008 or visit www.djreprints.com.